Why Asset Managers Should Embrace An API-First Approach

The short answer – APIs provide many advantages for adopters and are a necessary component of a modern technology stack.

At Axioma, we’ve developed our technology architecture to be API-first, which means our infrastructure is designed to be open and extensible. APIs aren’t an after-thought, but a core part of our systems design.

Here are the top reasons why we think taking an API-first approach is beneficial for asset managers.

1. Get back in the driver’s seat

For many years, a trend in technology was “Everything-as-a-Service,” as firms outsourced the technology and its management to save on costs. This trend has some clear advantages, such as eliminating the need to manage software resources in-house and, in theory, benefitting from the consultative knowledge of specialists. However, there are disadvantages as well. As solutions and their ecosystems have become more complicated, users have to continually go back to their vendors whenever they want to incorporate new datasets, change their analytics, or adjust their technology stack. The vendor has full control of the entire process. They control change management and pricing (if and when changes are made and at what cost), thus leaving clients with few alternatives except to unhappily comply or go through a long, costly process to change vendors.

An API-first approach puts the client back in the driver’s seat. At Axioma, we’re happy to provide our clients a fully managed service, if that’s what they want, but we also empower them to make changes on their own. Axioma’s APIs are straightforward to use and make it seamless for our clients to incorporate new data or other technology platforms into our (and their) portfolio and risk management ecosystem. As our clients quickly grow, our solutions are designed to quickly grow with them.

2. Choose the best provider or workflow for your needs

At Axioma, we provide our clients with award-winning software and services for portfolio management, risk management, and regulatory reporting. We work closely with our clients to ensure that our solutions are rapidly integrated into their investment management ecosystem. For example, our clients have other components within their ecosystem that are critical to their investment management process, such as a trade Order Management System (OMS). Axioma could select one or two OMS platforms to partner with, or build our own, but we want to give our clients the flexibility to use the technology that best meets their needs – regardless of the provider. APIs provide that seamless integration flexibility.

With an API-first approach, our clients easily consume the full suite of our products or just a subset of that suite. For example, a client could use our risk management solution with our user interface and interactive dashboards or choose to use our data in a proprietary system if that’s better for their overall workflow. We have clients that use our risk models, and others that also use their own or one from another provider. We think more choice is better for our clients and better for the industry.

3. Rapidly develop and deploy new solutions

APIs helped drive the FinTech revolution for good reason – they make it cheaper and faster to integrate and deploy solutions. IT departments don’t have to install and maintain technology on machines. Asset managers don’t need to build significant in-house infrastructure to have access to expansive sets of industry-leading data. APIs make it easy to select the best source of data or content and not rely on a particular third-party provider to aggregate it. If a firm decides to start holding a new asset type and needs the data to calculate prices or risk analytics, it can rapidly purchase and incorporate its preferred dataset.

In a competitive industry, technology and data can provide an advantage. If an asset manager can identify an opportunity and go-to-market faster than its peers, it can arbitrage an advantage until others catch up. At Axioma, we’ve used APIs to rapidly develop custom solutions for many of the world’s top firms. For example, we launched a solution with a large asset manager to replace their in-house risk system, which freed internal resources to focus on alpha-generating activities. Daily, we handle tens of thousands of API calls in less than two hours to meet the client’s nightly window for computing analytics. Our client has faster insight into its investment risk analytics and more powerful stress testing capabilities, which enables real-time decision making for a competitive advantage.

4. Enhance your security and data protection

One of the reasons why large institutional firms have been slower to adopt APIs is their concerns around security. However, their fears are easing as the technology has matured. APIs typically have built-in protections, including permissions/limits on who can access the data, the number of calls in a certain period, record logs, and the rapid ability to turn off APIs in the event of a security breach. We’d argue that, if security protocols are correctly set-up and managed, APIs are more secure than alternative methods of storing data and integrating systems that could leave asset managers vulnerable to breaches without a similar level of automated protections. At Axioma, we follow best practices for ensuring we meet security standards, including following stringent protocols for coding, assigning permissions and managing authentication. Microsoft Azure, our cloud provider, is also a leader in security and holds many industry security certifications.

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We believe APIs are transforming our industry by giving asset managers the ability to grow and scale, select the technologies that work best for them, and efficiently deploy new products while eliminating the time-consuming burden of managing cumbersome, siloed architecture. Ultimately, we predict this will result in advantages for adopters as they are enabled to rapidly capitalize on new opportunities while maintaining full control of the process.

Industry researchers see APIs as one of the next transformative trends in the capital market's evolution

Source: Josephine de Chazournes and Arin Ray, Celent, in The Great Transformation in Capital Markets, published Dec.13, 2017.